The Australian Competition and Consumer Commission (ACCC) has instituted proceedings in the Federal Court against NIB Health Funds Limited (NIB), alleging it contravened the Australian Consumer Law by engaging in misleading or deceptive conduct, unconscionable conduct and making false or misleading representations.

The ACCC’s action against NIB, announced yesterday, does not involve Qantas nor Qantas Assure. The ACCC action alleges that NIB failed to notify members in advance of its decision to remove certain eye procedures from its “MediGap Scheme” (MediGap Change) in 2015.

Qantas Assure is targeting a 2-3% share of the Australian private health insurance market on a revenue basis in its first five years.

Announcing the launch of Qantas Assure in November 2015, Qantas issued a media statement headlined QANTAS AND NIB TO CREATE A MORE REWARDING HEALTH INSURANCE EXPERIENCE. It quoted NIB’s managing director, Mark Fitzgibbon, saying the partnership with Qantas was “one of the most innovative partnerships ever offered in the Australian private health insurance market.

“As a health insurer we are obviously strong believers in encouraging our customers to be fit and active,” Fitzgibbon said.

“Qantas Assure’s ability to meaningfully reward customers for leading a more active lifestyle not only strengthens the relationship Qantas has with its members, but has the potential to improve their health and wellbeing and with that lower health care costs.

“The relationship with Australia’s most recognised brand, allows us to tap into their avid Qantas Loyalty membership to further grow our business, but equally this partnership allows Qantas to leverage our claims management and extensive underwriting expertise,” Fitzgibbon said.

Qantas chief executive Alan Joyce said Qantas Assure, which formed part of the growing Qantas Loyalty suite of businesses, would bring together NIB’s leading health insurance products with the market reach and consumer insights built up over almost three decades of the Qantas Frequent Flyer program.

The ACCC action against NIB alleges that NIB failed to notify members in advance of its decision to remove certain eye procedures from its “MediGap Scheme” (MediGap Change) in 2015.

Under the MediGap Scheme, NIB members had previously been able to obtain these eye procedures without facing out-of-pocket costs when doctors participated in the scheme.

The ACCC alleges that between June 2011 and October 2016, NIB represented to members that several of its policies covered eye procedures and members would not pay any out-of-pocket expenses, when in fact members could incur out-of-pocket costs. The ACCC also alleges that NIB made this representation by paying gap amounts on behalf of members for these eye procedures prior to August 2015.

In addition, the ACCC alleges that NIB represented to members that it would give members prior notice of any changes that detrimentally affected their entitlement to benefits under the policies.

The ACCC also alleges that NIB’s failure to provide direct advance notice to its members of the MediGap Change was unconscionable in all the circumstances, including where:

NIB had identified over 400 members who had received two or more eye procedures in the previous financial year, in circumstances where NIB’s management considered that it ‘probably ought to proactively communicate’ with these members about the MediGap Change;

after a doctor employed by, or associated with, Newcastle Eye Hospital sent a letter to his patients who were NIB members informing them of the MediGap Change and their right to move to another insurer, NIB contacted the hospital to request a commitment that its medical practitioners not communicate with NIB members or the media about the MediGap Change.

“Consumers have a right to be informed of important changes to their insurance cover in advance, as these changes can result in very large financial consequences at a time when consumers are at their most vulnerable,” ACCC Chairman Rod Sims said.

“Private health insurers must ensure their disclosure practices are in line with the Australian Consumer Law. Insurers should not expect consumers to bear the responsibility of making independent enquiries to find out about important changes made unilaterally by insurers.”

The representations are alleged to have been made by NIB in relation to the following 10 policies: “Basic Plus”, “Family Basic Saver”, “Family Plus”, “Hospital Plus”, “Just Hospital”, “Mid Plus”, “Premier Plus”, “Top Cover”, “Young at Heart Mid” and “Young at Heart Top.”

Since at least 2000, NIB has operated a “MediGap Scheme”. The MediGap Scheme had two main characteristics: doctors who chose to participate in the MediGap Scheme would receive an additional payment from NIB to cover their fee, and consumers did not incur any out-of-pocket expenses for that service.

From 17 August 2015, NIB removed the eye procedures from the MediGap Scheme (along with some other services).

Patients who receive these eye procedures are often elderly and require the procedures regularly to prevent further loss of eyesight.

Consumer issues in private health insurance are a current enforcement and compliance priority for the ACCC.

Statement from NIB

NIB said it would strenuously defend the claims.

“NIB rejects the position being taken by the ACCC and believes it has acted lawfully and ethically,” the company said in a statement to the Australian Stock Exchange reported by Skynews

“NIB has worked collaboratively with the ACCC throughout its investigation and has already taken steps to redress many ACCC concerns.”